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Category: News Update

The city known as zero mile in India is finally in the right place at the right time. Nagpur is in the dead center of the country, at the crossroads of busy road and rail corridors that bisect India east to west and north to south. Now, India is on …

NEW DELHI: The leasing of industrial and warehousing space rose 50 per cent in January-June at 7.3 million sq ft in eight cities and absorption may touch an all-time high in 2017 on positive sentiments after GST rollout, according to a study. Property consultant CBRE, in its report ‘India Industrial …

Container Corporation of India (Concor) will spend ₹6,000-8,000 crore over five years to develop infrastructure, buy equipment and strengthen IT-enabled systems, according to its Chairman and Managing Director V Kalyana Rama.

The capex plan for the next five years will be on the same lines as that of the past five years. However, since Concor has major plans to expand its warehousing spaces, investment will be higher, with nearly ₹8,000 crore instead of ₹6,000 crore, he told newspersons on the sidelines of the two-day CII South India Port Conclave.

Funding will be through internal accruals. Concor is a zero debt company, he said.

Concor plans to increase warehousing space by more than three times to nearly 15 million sq ft over three-four years from the present 4 million sq ft. It is developing nine facilities on the East coast. There is a plan to expand the number of warehouses to 100 by 2020 from the present 72 with all gateways connected. “Our endeavour is to evacuate as much as possible by rail,” Kalyana Rama said at the seminar.

He further said the US has warehousing space of nearly 4.5 billion sq ft while India has around 1.1 billion sq ft. However, post GST, there will be a huge demand for warehousing space, and Concor is creating such facilities, he added. In three places, Concor is constructing warehouses in parcel size between 280 acres and 400 acres.

Concor is working on an inter-modal transport system to reduce logistics costs, and is in talk with various stakeholders, he said. However, the main focus is on IT-enabled systems, which will be critical in the total supply chain, he added.

The logistics industry in India is likely to grow at a rate of 9-10 percent over the medium-term, supported by underlying structural positives, rating agency ICRA said on Monday.

While the key driving factor on the demand side would be the economic recovery, the trend towards outsourcing of non-core activities like logistics, warehousing and associated activities to integrated players is likely to drive the share of the organised segment, it said.

“The domestic sector is currently in a transformation phase with game-changing trends like implementation of GST, increasing focus by foreign investors across the logistics value chain, growing demand for end-to-end solution providers and emergence of new avenues such as e-commerce, logistics parks, cold chains and new startups.

“The logistics space in India is expected to grow at a rate of 9-10 percent over the medium-term,” the rating agency said in its report.

The GST implementation will also support organised players as it will have three major implications – consolidation of warehousing network and a shift towards a ‘hub and spoke’ model, higher degree of tax compliance and creation of level playing field between express and traditional transport services providers by virtue of access to input tax credit, ICRA said.

It said the Railways’ competitive position is expected to improve on the back of commercialisation of DFCs and augmentation of existing network.

The railways account for 30 percent of total freight movement in India and are a preferred mode of transportation for long haul and bulky commodities such as coal, iron ore, fertilisers, steel and cement.

“Despite its dominance in transportation of select commodities, it has gradually lost market share over the past few decades due to a confluence of factors, including under-investment in infrastructure, limited private sector participation, better service and reliability offered by road transport segment, and increase in freight charges by railways,” it said.

Additionally, the government’s other major emphasis is on improving India’s transportation mix by developing inland and coastal waterways.

At present, seaways account for a minuscule 6 percent of total freight movement in India compared to countries like China (30 percent) and USA (14 percent) that heavily use waterways.

Given the economic and environmental benefits, the government has chalked an ambitious Sagarmala project that aims at doubling the share of seaways in the transport mix over the next decade by executing multiple projects related to expansion and modernisation of various ports.

The report said with an attempt to improve integrated logistics, the government also plans to develop about 35 strategically located multi-modal logistic parks (MMLPs), close to major manufacturing and consumption centres. These initiatives have significant potential to bring down the logistics costs in the country over the medium term.

“Overall, the Indian logistics industry is at the cross-roads, poised for growth on the back of the economic recovery and changing industry dynamics,” it said.

The warehousing and logistics sector, which has attracted investments of more than a billion dollars in the first half of 2017, is set to gain significant momentum propelled by the goods and services tax (GST).

Indian and overseas developers and investors are chasing new partnerships to enter the space as India moves towards a new tax regime that is expected to realign the industrial landscape and warehousing needs of industries.

Singapore-based Assetz Property Group, which has residential and commercial office projects in India, is in the last stage to sign a large warehousing platform transaction with a partner, a person directly familiar with the deal said. He did not want to be named.

The Assetz transaction follows a slew of significant warehousing deals that were announced this year. In June, Singapore-based Ascendas-Singbridge Group announced a joint venture (JV) with realty firm Firstspace Realty to enter the industrial logistics and warehousing market to jointly invest as much as $600 million over 5-6 years and develop around 15 million sq. ft of space.

In April, Ascendas-Singbridge Group bought six warehouses with a total space of around 832,000 sq. ft from Mumbai-based logistics firm Arshiya for Rs534 crore.

Canada Pension Plan Investment Board (CPPIB) and Everstone Group’s industrial and logistics real estate development platform, IndoSpace, announced a JV named IndoSpace Core in May to acquire and develop modern logistics facilities in India.

“In terms of warehousing and logistics, there will be a clear trend towards larger and more modern warehouses spread across fewer but better-placed locations such as sea ports or major highways,” said Rajesh Jaggi, managing partner, Everstone Real Estate.

CPPIB has initially committed around $500 million and will own a significant majority stake. The venture also has the option to acquire an existing pipeline worth about $700 million as well as participate in a future development pipeline.

“In particular, IndoSpace sees even more robust growth with GST being rolled out. I expect in the next 5-7 years we will have around 50 million sq. ft of modern, developed and under-development light industrial and warehousing parks from the current 30 million sq. ft,” added Jaggi.

As GST comes into practice, the Indian warehousing sector is poised for structural changes in its operation dynamics.

The current system of interstate taxation results in space take-up being dictated by lower taxes (rather than operational efficiencies) as well as the domination of the warehousing sector by a large number of unorganized players, property advisory CBRE said in a 1 July note.

“Once GST comes into play, the focus of players is likely to be supply-chain efficiencies, which will result in consolidation of warehouses and entry of national-level/credible players,” CBRE said.

An early mover in the warehousing and logistics space, realty firm Embassy Group, and an affiliate of investment firm Warburg Pincus set up Embassy Industrial Parks Pvt. Ltd in 2015 to invest $250 million in building industrial parks with warehousing facilities. The JV has acquired land in Chennai, Gurugram and Chakan and has started leasing out space in a couple of facilities as well.

“GST not only enables ease of doing business but will also help open up bigger and better warehousing facilities for long-term usage. There is a lot of institutional capital chasing this space but there is more than enough space for everyone given the opportunities,” said Anshul Singhal, chief executive, Embassy Industrial Parks.

Later this year, Mumbai-based Hiranandani Communities plans to roll out its industrial park business, and the company is looking at land parcels in Pune, Chennai and Nashik.

“We were expecting to start out earlier but we waited for GST and should be ready by the year-end. The growth potential in this business is high but we see it as a niche opportunity,” said founder Niranjan Hiranandani.